But what does all this mean for real people -- the ones who are not part of the 1%? The purchasing power of the minimum wage peaked in 1968 and has been diminishing ever since. Today, in order to match the purchasing power of 1968, our minimum wage would have to be $16.50 per hour. This article talks about how QE helps other countries, but it says nothing about how QE creates jobs or makes living affordable in the United States. America no longer has even one company that manufactures a toaster, in America, using American labor. QE may be good for the bankers and their plutocratic, multinational clientele, but regular people are not now in a position to trust bankers, at all, for any reason. The academic language and analysis may make you feel knowledgeable and important, but the number of homeless people is still climbing in America, and retirement funds have been, and are continuing to be, raided. And in places where there are still jobs, real estate prices are through the roof, rents are skyrocketing, and we know food prices are set to rise. In my area, people are renting curtained off spaces in private living rooms because they can't afford even the cheapest apartment. So goodie for your pals, the government and the oligarchs!! And still, screw the people I figure.

Banks have been creating money (currency) for about 400 years in the West. Money has been created out of thin air ever since early bankers issued paper receipts in excess of the gold and silver customers had stored with them. Whether it is short-term loans between too-big-to-fail institutions, or fractional reserve banking, this tradition of money creation by a special class of human beings continues to this day.

One problem is that, the more money is created, the bigger the bankers' profits, but also the more risk to the entire financial and economic system. The tug-of-war between regulation and getting around it continues.

It would appear to an alien from space that no one has considered solving the problem at the root. Instead, the attempt has always been to allow bankers to continue creating money, but to try to protect the rest of society as best we can.

When banks could no longer rescue each other from runs, central banks were created to concentrate the rescue firepower. When central banks and national currencies themselves came under question for having created too much money, the gold standard was invented to prop up confidence. When too much money was eventually created by the central banks to maintain the peg with gold, the gold standard was slowly diluted and finally abandoned. Central banks resorted to inflation targets to maintain a semblance of not robbing those who have no power to create money. In the aftermath of the 2008 crisis, there has been much talk of dual inflation and employment targetting. In the name of employment, the last vestige of sound money is being eroded.

Sound money is a cornerstone in the lives of everyone in the world. Unsound money has caused investors and their banks to move assets around and chase the latest high returns to avoid the automatic erosion of the value of their cash. This phenomenon is responsible for much of the asset bubbles, financial crises and misery of the bankers-as-aristocracy era.

Bankers and many modern economists would no doubt maintain that the money creation is crucial for modern economic growth. My suspicion is that, rather than a food, it is a performance enhancement drug to which we are addicted to the extent that there will be much pain if and when we decide to discontinue it.

Renaissance Italian city states experienced good economic growth without resorting to money creation in this manner. The crucial difference was the clarity that credit was credit, and that the creditor was fully aware of the risk and acted accordingly. By contrast, the modern era began with the deception that a "deposit" was as safe as storage.

Both the deception and its execution have changed forms by now, but the basic problem remains that banks are creating money, that is as good as any other, out of thin air. Not only do they dilute the real wealth of other people; they are incentivized to create as much money, and thus risk, as possible, as long as they have tied their own survival firmly with that of the rest of the economy. And the only real "solution," ultimately, is that the central banks create yet more money to rescue the world. From here, the cycle continues.

The crucial difference was actually that usury was illegal. The Jews could lend at interest, and it happened, but it was both illegal and frowned upon. Now we've accepted that skimming off the top of everything, good, service, debt, asset, or equity, is "normal." No wonder our financial system degrades. We have normalized debasing ourselves.

Our governments are printing money like Wiemar Germany and we are told that it is a good thing. How much tension has built up in our economies already? What assets are bubbling now? Clearly, the monetary theories of Milton Friedman are being ignored by this bunch. Oh well... a little hyper inflation can't be that bad, eh?
Or is it?http://www.barnesandnoble.com/w/the-fourth-branch-john-pepin/1114374043?...

Last time I checked, no Americans were getting paid three times a day by the wheelbarrow. Nor were they eating horseflesh in the street. If the US is printing money like the Weimar Republic, than Paul Krugman is a republican.

We have yet to exceed inflation of 3% a year. That is thanks to a little thing called interest on reserves, my friend. At what point will you quasi-Austrians be satisfied that QE's have not caused hyperinflation? 2015? 2050?

The academic calculation of inflation doesn't include rent, or transportation, or the real things people need to live. If milk stays the same price, but gas doubles, and the rent triples, can you honestly suggest that "inflation is low"? My rent just went up 10%. A friend of mine had hers go up $400 in one pop. Maybe in academia inflation isn't happening, and maybe it isn't in the hallowed halls of the Capitol, but it *is* actually happening in real people's lives.

I wonder if the 'Tragedy of the Currencies' will ever become recommended reading for would-be Central Bankers.
There will be no real recovery (for ordinary people) while the meddling continues. Sadly, the meddlers and their friends will be just fine.
We have a world awash with money created by financial legerdemain rather than by productive enterprise. Conjuring up more is not going to help, regardless of the sleeve from which it is produced.

What is lost in the commentary is the FACT that QE and these actions have been required to combat arbitrage that threatened currencies and Nations. Hedge funds and bond vigilantes precipitated this, it was the private financial sector, unbridled by regulators who initiated the financial crisis.

Far from being reckless and threatening hyperinflation, the CB's are acting mostly to preserve the life of their Nation's economies. If there are fingers to be pointed and alarms to be raised let's go back to AIG London, Bear Sterns, and every other over-leveraged time bomb that almost brought the whole thing down on our heads. Contending with that crisis has tested theory and policy, and it is far from over.

Hyper-inflation fears (unfounded by any real market measure) are literally meaningless compared to having nearly been thrown onto the gold and lead standard. Better to have excess reserves as the CDS market continues to unwind and securities continue to be written down than to perform this knife juggling act on a highwire with no net.

In sum, CB's have had to be even scarier and audacious than the hedgies and bond vigilantes, that is where we are at.

What is lost in your comment is the fact that QE feeds first and foremost those who threatened currencies and nations in the first place, the same private financial sector who initiated the financial crisis. It's them who benefit most. And this is also why the big American Banks are hoping for the continuation of Quantitative Easing way into early 2014.

Experts are pointing out that real wages – adjusted for inflation – have fallen in both the US and UK, where QE has been a key tool for boosting growth. In Germany, meanwhile, where there has been no quantitative easing, real wages have risen.

I'm used to Free Exchange being one the best columns of The Economist but this article disappoints me no end.
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Different initials describing the authorship?
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I repeat humankind is to Economy now as we were to Astronomy in the 16th century. We know that Earth goes around the Sun (markets are more efficient than planned economies) but that's about all we know.
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The Kepler of economics who will discover the equations of economic behaviour, hasn't been born yet.
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So, let's be careful: we know from experience - and a tiny bit of theory - that debasing currencies tends to trigger short term absolute mayhem: Germany 1924, Hungary 1946, Yugoslavia199?, Greece 194?.....
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Are we so eager to repeat it?
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Smoking is a slower form of suicide.

Whatever politicians say, inevitably all sovereign states due to nationalistic pressures, will use whatever at their disposal against all other countries if competitive advantage can be obtained, no matter whether that can be being openly about what they are doing or by stealth. Unfortunately it is the nature of globalization and national vested-interests that is inherent within all government thinking. Therefore people will have to get used to the fact that through necessity, nations will do whatever they can to get the upper economic hand. All others are doing it so no country is going to be different and shoot themselves in the economic foot. But wouldn't it be nice if politicians looked for once to a pluralistic form of cooperation and shared their economic wealth. And I don’t mean the EU in this respect. Then through cooperation, communication and collaboration we might eventually see a sustainable world-order. Unfortunately again as history has shown continuously, politicians are not built to do this between other competing nations and their politicians. Considering this historical aspect of nationalistic governments, the world will continue in a spiral of economic conflict and where eventually using this mindset, it will eventually implode as natural resources run out and the world's population exceeds 10 billion. Around 2032 will be the crunch time in my opinion and something that research data from both the Royal Society (http://royalsociety.org/uploadedFiles/Royal_Society_Content/policy/proje... )and MIT http://www.naturalnews.com/035700_MIT_economic_collapse_simulation.html) agreed with last year. Indeed they both predicted through their individual research that the world would implode around the same time. The only way to stop this eventuality happening is for nations to construct and operate the vast ORE-STEM complex for the good of all humanity and creatively developed and supported by some of the greatest minds of the 20th century – Glenn Seaborg, John Argyris, Jerome Karle, Xanthos Menelaus et al.

Is the world going to implode physically or was this a metaphor? I guess 2032 is as good a year as any for the world to do this, if it is bent on doing it in the first place. You are not alone in being confused after reading this article.

John Maynard Keynes is often viewed as an economist who tolerated and supported inflation as an byproduct of sustained, managed, economic prosperity. Yet this excerpt from The Economic Consequences of the Peace, written just at the end of World War I, makes clear how fully he understood inflation's potential to destroy the fabric of society:

Concurring with Lenin he wrote 1919:
The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.

Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

The case made for QE is a very weak and spurious one. Nothing is told about the downside and negative effects of QE.

These are:
- bubbles are created and sustained esp. In the real estate sector
- pension plans and their assets get devalued
- prudent savers pay for imprudent overstretched debtors

The illusion is nurtured that a debt problem can be resolved by monetary measures. There is hardly a more complacent report than the BoE report on the effects of QE. It reminds me of the progress report of the Central comittee of the communist party of the USSR in the eighties.

Distorting the term structure of interest rates does not necessary stimulate investment or consumption. Why should someone invest when he knows asset prices are inflated because of too low interest rates. Waiting for the bubble to burst is the better option. The same applies for consumption.

QE is actually a tax levied on savers. Central banks should be depoliticised and should stay out of distributional measures.

Without QE I suppose the western world would have been hit by a depression of the magnitude seen in the thirtees. As a remedy to that, the cons of QE may outweigh the nachs. There was certainly no good solution. And if many people are debtors beyond their abilities, for some reason, something must give, which means that the creditors must take a hit, one way or another. What is annoying is if the kingmakers think QE doesn´t have big drawbacks. Perhaps QE only postponed the day of economic reconing. Just as piling up more and more debts, is not sustainable in the long run, not for families, not for the government and not for all in between the two. There will be a new bubble blown, and it is bound to get bust. The beauty for the citizens of western societies is that by inflating QE way, their debt burden will become lighter. The creditors, be it oil companies, oil producing countries, the Norwegian oil fund - or China, they will see their assets decimated as will pension funds. So people should prepare for economic hardships hitting them at old age.

I use the term "fictitious capital" to describe what the Big Bankers, public and private, are attempting to inflict on the ordinary 99% people who through their entrepreneur led labour create ALL REAL value, capital included.
In the middle of the 19th century Karl Marx coined this term to describe the notes and loans that governments and gentry used to finance wars, luxuries, estates and otherwise living beyond their REAL means. Only his term was really new, Aristotle and many who followed him before Marx, elaborated on the dangers of worthless money. Democratic Athens and militaristic Sparta supplied the concrete examples of each.
At Marx’ time such paper would accrue during "Boom" times as the economy expanded and would usually max out at around 10-12% of a countries GDP. As long as the good times rolled on it was not a problem, but came a crisis of over production (of all the wrong things) there would be the day of reckoning. Ergo, the bill collectors came and cash not paper promises was the order of the day. This resulted in a variety of ways to settle; some were paid in part or in full but more often bankruptcies and swindles resulted. Then the stage was set for the next cycle - boom bust.
Today though the situation with 'fictitious' or 'counterfeit capital is vastly different.
100 years of pumped up growth for growths sake first based on the now discredited ideas of John Maynard Keynes has produced a situation where some 20 times the worlds gross product exists as fictitious capital, a counterfeit collection of deficits, bills, bonds, exchanges, derivatives, bubbles (real estate) swaps and the latest fraud, "quantitive easing". (Le Monde Diplomatique puts it at 50 times)
$$Dollars, Єєuros, RRubles, Ль, &с…all the same!!
To grasp the idiocy inherent in these figures imagine approaching your friendly personal banker for a loan, line of credit or mortgage some 20 times your net collateral worth; how far do you suppose that might fly?
Yet with the above listed gimmicks, that is precisely what members of the bankster clique, supported by military-industrial complexes do amongst themselves.
Every day we read of new Central and private bank meetings, "Increasing capital base" is their current fad.
OFF THE WALL! There is not a farthing of REAL capital in all of this rat-bag of lies, swindles and manipulations.
REAL capital is ONLY accumulated labour dedicated to enhancing future production. Ergo entrepreneur led LABOUR (of the 99%) is the only source that can augment existing capital or create new.
The banksters, led by the IMF, USA FED, and British "financial services" are well aware of this fact but that will not stop them from attempting to download this fraud onto the REAL product of Labour in the form of "bailouts" of "sovereign" debts, to be serviced by taxes on the REAL producers.
The 99% will be robbed of (much prepaid) social services and benefits to service "debts". “Austerity” it is called when those who had NO hand in running up this fraud are required to pay interest that will amount to 40-60% of the future product of their labour. Gone will be pensions, good schools, decent medical care, infrastructure (e.g. utilities that work reliably), environmental protection; even adequate diets will be history. "Let them eat cake!" exclaimed La Royale Marie Antoinette.
Let them eat (genetically modified) garbage, implies La Grande Dame Christine La Garde, of the International Monetary Fascists(IMF)
So Greece, you are the front line today, Italy and Spain may be next, but do not think that any country, including the relatively well off Germany or the resource rich Canada and Australia will be forever exempt. Ms Merkel, beware!
The "poor little ones" are but appetizers; they will whet the appetites of these financial service vultures and jackals. For certain, like buzzards flocking to road kill. if they succeed in the beginning the taste of financial carrion will make them hunger for more, and they will finish only when the 99% of humanity is subject as debtors to enslavement by the 1%.
But this does not have to be!
Greece you can repudiate the fraud! Lead the way! DEFAULT is the way to go!
99%; be inclusive! Occupy-Idlenomore, Support Greece and Slovenia today, Italy Spain, …, &c. tomorrow and.../?/ the world in future.
Hold on to your souls! Hang tough!
You have a WORLD to WIN!!
For those of you who may have read this comment previously, Churchill’s advice immediately springs to mind:
“When you have an important point to make, don’t try to be subtle or clever. Use a pile-driver. Hit the point once. Then come back and hit it again. Then hit it a third time – a tremendous whack.”

This article is too sanguine.
QE is a slippery slope that will come home to roost just when those who think that somehow through "creative" manipoulation they can cheat the "cause and effect" of unbridled indulgences, it will hit with unmitigated consequences.

IF cheating the savers and retirees of the value of their deferred gratification and reward those who borrow and spend other people's savings is morally acceptable then by all means. Else, it is best to stick to the simple and righteous solution -- when in debt, cut spending until one can afford to spend again. No "ifs" and "buts". Just do it. No pain no gain.

The aggressive nations like America and Japan will win in this "currency wars".
The Europeans are too fractious and bureaucratic to respond timely and effectively. The BRICS countries are still not sufficently developed in their economy as well as financial institutions to withstand the twin assualts from the America and Japan.
America and Japan = 1
Europe = 0
Rest of the World = dock-ed
If the American and Japanese media says they are not currency manipulators, then they are not. Period.
Russia is the evil state. Period.
China is the currency manipulator. Period.
India, Brazil -- well, they are not a threat yet. So, no need to label them yet. When the day comes, we will then think of something to label them.
Different times different banners. Methods change, tools change, but interests and motivations permanent. Such is the story of mankind.
When a rabbi addressed Jesus 2000+ years ago thus: "Good teacher,....".
The Lord Jesus replied: "Why do you call me "Good teacher"? Do you not know that no one is good? Only God is good."
Jesus said this not because He did not believe Himself to be good, but to point out to the learned man that if he, as a man of study and wisdom, truly believe what he is addressing is appropriate, then surely he would realize that Jesus is God incarnate. Secondly, to point out what is common sense to even a wise man that no human, and by extension, no group of humans or society, is good. All are selfish. If any looks to be "good", there in also you've found a relatively more consummate hypocrite.

The majority of conclusions in this post appear to stem from the belief that QE creates inflation. While QE does increase the money supply, it does not change the quantity (or necessarily value) of net financial assets held by the private sector. In fact, QE removes interest income from the private sector (http://bubblesandbusts.blogspot.com/2012/12/zirp-and-qe-remove-private-s...).

Given Japan's actual experience with QE over the past decade and more recent experiences in the US, Eurozone and UK, it seems very unclear whether QE has any lasting inflationary effects (beyond a couple months). If not, than there is little reason to expect any sustained moves in relative exchange rates (as witnessed by the yen's appreciation over the last decade). Whether or not QE actually is positive sum, let alone positive for the domestic country, is not as clear as it might appear.

It is true that QE doesn't necessarily create an overall inflation in a recessive economy as long as the created money isn't directly injected into the pockets of consumers and businesses. But what quantitative easing does in any event is to increase the excess reserves of the banks.
It's only when consumer optimism rises and demand becomes economically justified that banks use their excess reserves to ease lending policies and, maybe, create a spending spree. This is the moment when QE triggers the inflationary spiral.

Raise capital requirements, raise interest rates, raise taxes, slash fiscal expenditures- even just the communication of the intent thereof- are all counter-cyclical actions available and demonstrated to control inflation. A spiral can be very difficult to maintain given these options. It is surprising how sanguine the Austerians have been in the face of their own failure to comprehend counter-cyclical monetary and fiscal policy based on the outcomes taken. Even the IMF's repudiation of Austerity, the knock-on multiplier of 1.8 in GDP lost for each 1 of reduced national spending during a contraction is blithely ignored by most.

Maybe the murderous spending spree you seem to fear would be better controlled if the injection of cash into households came through better income rather than fickle and bubble-prone consumer credit.

Of course this would mean a brake on the current confiscation of all productivity increases by so-called shareholder value, with the ensuing frustration of the workforce being allayed by generous (at first) personal credit. But don't count on it.

A suicidal free fall which has been going on for about 30 years (before which average income and productivity followed parallel paths) can only go on until it hits the pavement with a sickening thud.

My stance: Production of fiat money can never create sustainable wealth, it creates bubbles which, sooner or later, will burst with devastating consequences. Only the production of useful products will, long-term, create wealth.

Okay, if the production of fiat money can create wealth then let's be really bold.

Why not wipe out poverty in the U.S. entirely (or in the whole world for that matter). Let's start with making everyone in the U.S. rich beyond their dreams. Let's mint those coins Paul Krugman was writing about in New York Times (January 7, 2013) and let's deposit them with the Fed, and thereby create trillions in new money.

How much fiat money do we need to make all Americans rich?

The current population of the U.S. is about 310 million. 'Rich' in today's terms means that every resident has at least 1 million dollars at his free disposal. Okay?

Some easy math tells us that for creating new "wealth" of 1 million dollars for every man, woman, and child in the U.S. we need $310 trillion in new money.

Now, let's have Congress authorize the spending of this $310 trillion by actually giving each man, woman, and child their $1 million share. Poverty is now eliminated, right?

Of course, the deficit has exploded, but that's okay because we are assured that there won't be any inflation, so there will be no harm.

Hooray, then we're all rich without lifting a finger! All of our dreams have come true! Yippee!

Fact, however, is that we only arrive at this point when the real economy (not an economy on steady life-support) becomes productive, competitive and thus intrinsically healthy. This can’t be achieved through never-ending monetary expansion.

Regarding the Bank of England’s rounds of QE the Guardian noted, “Quantitative easing is good for the rich, bad for the poor” and continued: “The Bank of England's recession-busting policy of buying up billions of pounds of bonds may have contributed to social unrest by exacerbating inequality, according to City economists. As the Bank of England considers unleashing a fresh round of QE, Dhaval Joshi, of BCA Research, argues the approach of creating electronic money pushes up share prices and profits of institutional investors without feeding through to wages.” (end quote)

Banks don't need reserves (excess or not) to ease lending policies or make loans. If demand for loans by credit-worthy borrowers rises, the banks will make those loans at a rate deemed profitable and ensure they have enough reserves later. To ensure a smoothly functioning payments system, the Fed must ensure that banks, in aggregate, have enough reserves to cover demand based on requirements and payment needs. Limiting reserves is therefore not a credible means of constraining new credit. The Fed's only mechanism is altering the price of money (interest rate) but that is relatively ineffective for minor changes. QE does not risk any inflationary spiral.

Monetary expansion without comparable accretion of the real economy always bears the danger of inflation once this money finds its way into consumer wallets (which failed so far in the US). The lasting inflationary effect will increase as bigger the excess reserves are that the various rounds of QE produced once the economy fires up again, without a functioning exit strategy to drain the reserve balances to its pre-QE level.
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It is also doubted here that QE works the way its proponents propagate, at least not in a sluggish economic environment (it surely would boost an already booming economy).
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In Great Britain, e.g., the BoE's cheap money drove down gilt yields and annuity rates and forced pensioners, savers and companies to hoard cash to counter the negative impact of QE on their investment income, or they simply exchanged cash into dormant precious metals.
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This counter-effect is one of the reasons why QE failed to stimulate recovery; instead it caused a collapse in the velocity of money circulation. BTW, similar happens in Japan since 2001.

My point was exactly that there is no monetary mechanism for the excess reserves to find "its way into consumer wallets." Banks cannot lend reserves outside of the banking system.

QE2, 3, and 4 simply exchange reserves with assets of similar moneyness in the private sector. Yes it increases the money supply, slightly, but it does not alter the amount of money in the private sector (excluding the CB). Since the CB cannot directly spend the funds (only exchange), the sizable balance sheet does not pose an inflationary threat regardless of the economic environment.

You are talking about the Fed creating money to buy MBS and Treasuries from its private sector member banks. Yes, this helps foremost the concerning banks to take old debt off their balance sheets, replacing it with fresh liquidity. However, eventually it will be loaned against new collateral to other banks – or as loans on the overnight market.

The fact that banks cannot lend reserves outside of the banking system doesn’t matter, since it finally will end up on the financial market . . . and consequently with end-consumers, e.g. house buyers or businesses. This might or might not have an inflationary effect, but how many nooks and corners it took to get there is actually secondary. The overall money supply in circulation increases by the amount of the freshly created money - without a necessary growth of the real economy. Only this matters.

But even this 'secured QE' is not the case when it is massively applied directly to balance the federal budget. At the end of 2011 outstanding treasury securities totaled $10.2 trillion. This was up from $9.2 trillion in 2010, a rise of approx one trillion dollars that was used to finance the federal budget deficit.

Yes, some of these low-interest securities were picked up by foreigners (about $287 billion), but most of the slack was picked up by the Fed against ‘empty’ IOUs. To be precise, the Fed was buying 'thin air' in return for $642 billion in newly ‘created’ money as part of its quantitative easing program.

This hocus-pocus is what I’ve meant. Some more years and the world, with China leading the way, will declare open season on the greenback . . . if this Ponzi scheme doesn’t end soon.

And my point was that QE, which ultimately increases private debt rather than average income, is no sustainable way of breathing life into an economy. So it seems we do not really disagree.

I think the EU has no choice but to grow aware of the currency war being waged on it, and somehow fight back or at least take mitigation measures. But QE may not be the weapon of choice. And in that respect, German fixation on currency strength is as much a superstition (rooted in longing for the old DM) as the (dwindling) belief in the Holy Invisible Hand's benevolence.

The ECB exercises QE big-time. Germany's 'fixation' is not relevant, since the ECB is an entity defined by a majority of its members and not an extension of the Bundesbank. Also the area's inflation target is set by the ECB, yet by statute it should not exceed 2%. But this marker is exceeded all the time. Euro Area Inflation Rate averaged 2.27 Percent reaching an all time high of 5 Percent in July of 1991, right after the physical switch.

You seem to talk about national budget deficits and national debts, which the Latin Euro countries want to pool in form of eurobonds, but a majority refuses to take this road, among the latter is Germany. This refusal has nothing to do with "fixation on currency strength", but rather with "obsession with moral hazard" at the expense of the taxpayers in prudent countries.

If you believe that a currency war is being waged against the Euro, then keep in mind what John Maynard Keynes had to say about it (quote): "Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. . . . By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers' . . ."

That debate exists because the world's leading economies have settled it, by embarking in a thinly disguised currency war to bolster their flagging exports.

Caught in the crossfire of that currency war, and in fact targeted by its belligerents, the one major economy which "virtuously" resists the siren calls of QE is rewarded with disaster on the trade front and debilitating recession.

When will the psychotic German obsession with currency strength, enforced by the shackled and hobbled ECB, be seen for the madness it is?

The EU did not start or want the war, but now it has no choice but to fight it, or at least duck the (not so stray) live shells buffeting its economy. No continent is too big to sink.

thanks for the theory lesson, but you've been slightly brainwashed by the establishment. Its better to be honest that QE is not having much effect on the real economy anywhere in the world by "lowering the inflation-adjusted real interest rate", and that the real (but unspoken) hope is that it will help America, Britain and Japan export their way out of trouble by weakening the currencies.

The hypocrisy is understandable from officials - no government can afford to admit that they are trying to weaken their currency (unless they are strong and silent like the Chinese). But the media should feel free to call it like it is.

Developing countries questioned QE when it was first proposed as Mugabe-style money printing. Back then, Western governments said what rubbish, of course not, its totally different because we're responsible people and can be trusted not to misuse this tool. Then a while later, one British finance minister said to his central bank governor - look, there's no point my paying interest on all these governments bonds you've bought. Let's cancel the interest and save some money. And now we read oped articles and speeches from BRitish worthies wondering whether there is in principle anything wrong with central banks just printing money and giving it to the Government to spend.

The road to Harare is paved with good intentions. And elevated on a buttress of hypocricy.

You can't argue with these guys because they have written the rules in their favor. Only models that assume a big payoff from printing money are allowed. They are totally blind to the circular reasoning. Also, they commit the post hoc fallacy with abandon.
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Printing money can have a short run effect under the right circumstances, but in the medium term it causes unsustainable booms that end in recessions and wipe out most of the gains made.

Isn't part of the problem that we are all signed up to Chicago theory monetarism as propounded by Friedman and carried out by Thatcher and now Osborne. Bond markets pay attention to growth prospects as well as a nation's ability to meet the demands of the debt repayment schedule. Of course, sterling's depreciation could occur because confidence in the austerity programme dissipates but this is obviously a sub-optimal outcome. I'm not expressing myself very clearly so apologies for that.